FCC and Radio Spectrum Sales

January 27, 1997

Some claim the federal government will only collect a fraction of the $10.2 billion in bids accepted by the Federal Communications Commission for the so-called C-Block slice of the radio wave spectrum set aside for providers of personal communication services. It seems that to help these smaller businesses with their financing, the FCC offered exceedingly generous terms.

Five percent of their bid was due at the close of the auction and an additional 5 percent when they got their license.

The companies will only have to pay quarterly interest payments for the next six years -- at a generously low interest rate.

Only then will they begin to pay off the remainder of the principal -- seven years after getting their license.

Experts say that winning bidders assumed they could raise money by going public and securing additional capital from banks and wireless telephone equipment vendors. But investors have not been all that interested and none of the initial public offerings has been completed. One of the top winning bidders has already defaulted on its payments to the FCC.